The Investment Advisers Act of 1940 defines advertising as any letter, notice, circular or other written communication addressed to more than one person, as well as any notice in a publication or by radio or TV that contains the following:

Graphs, charts, formulas or other devices used to determine how to choose a security or when to buy or sell a security

Information that offers analysis, reports, or publications concerning securities or when to buy or sell a security

Any other investment advisory service that relates to securities

The following media have also been identified by the SEC as forms of advertising:

Form letters and other mass mailings

Press releases

Newsletters

Marketing brochures

Telemarketing scripts

Slides or audio/videotapes used in marketing presentations

E-mail messages sent to more than one person

Advertising standardsIA advertising is not permitted to:

refer (directly or indirectly) to testimonials about the advisor.

refer to specific past recommendations that were profitable. However, an IA may advertise a list of all recommendations made within the immediate past year (or longer), as long as all pertinent information is included (date of recommendations, market price at time of buy, sell, and current), along with a disclaimer on the first page stating: "It should not be assumed that recommendations made in the future will be profitable or will equal the performance of the securities in this list."

advertise that any report, analysis or other service is free of charge if that is not completely true - there must be no obligation or condition of any kind.

represent that a graph, chart, formula or other device can (by itself) be used to determine which securities to buy or sell, without disclosing the limitations in doing so.

Performance advertising In a guidance statement called the Clover Capital letter, the SEC clarified that advertising of actual performance data would be prohibited if the advertising:

included results that didn't reflect the impact of brokerage commissions, advisory fees and other client-paid expenses.

failed to disclose the effect that market or economic conditions had on the results.

failed to disclose whether or not the results shown reflected reinvestment of dividends and capital gains.

made claims about the future potential for profit without also mentioning the possibility of loss.

failed to disclose (if applicable) that performance results related only to a select group of the IA's clients.

compared results to an index without disclosing all material facts relevant to the comparison.

failed to disclose any material conditions, objectives or investment strategies used to obtain the results.

Exam Tips and TricksOne question you can expect to see involves performance advertising. In particular, one type of answer that appears to be correct is "IAs cannot use performance advertising that promotes results received by only a small group of the portfolios under management." But the requirements listed above state that it is only prohibited to not disclose that only a small group was used, so the answer above is actually incorrect.